Traditional insurance companies in South Korea are speeding up digital transformation of their operations and services to compete with emerging tech-savvy companies that are proliferating in the financial sector.

However, their digital strategy also involves industrial crossover partnerships with the emerging competitors, if necessary.

Samsung Fire & Marine Insurance, the nation’s largest non-life insurance firm, and Kakao Pay, a fintech spin-off of mobile messenger giant Kakao, together plan to set up an online only insurance company this year. The two companies are expected to file an application for a preliminary license with the financial authorities next month.

The regulator Financial Services Commission will decide on granting a license to what will become the nation’s second online non-life insurance firm within two months after receiving the application. The insurance firm will have to apply for the final authorization within six months after getting the preliminary license.

Kakao Pay is expected to help combine its cutting-edge technologies, including artificial intelligence and blockchain, with products developed by the insurance unit of Samsung Group.

“Conventional insurance firms will have to offer more values than just financial products to keep up with the fast-changing business environment,” an official from Kakao Pay was quoted as saying by news outlet Korea Economic Daily. The joint company is expected to start operating as early as the first half of next year after completing the license process.

Joining forces with SK Telecom and Hyundai Motor Group, Hanwha General Insurance launched the nation’s online non-life insurance firm Carrot General Insurance in January. The company has launched new types of insurance products in Korea, including a pay-per-mile insurance product which charges drivers a premium based on driving distance, and an insurance service for pets.

To help accelerate the pace of digital transformation, the financial authorities, including the FSC and the Financial Supervisory Service, have also rolled up their sleeves. Working with members of the General Insurance Association of Korea that represents the domestic non-life insurance firms, the financial authorities will together establish an organization to promote the insure-tech segment this year.

The new organization will allow the authorities and private companies to better communicate with each other in their efforts to break down regulatory hurdles for digital transition initiatives.

By Kim Young-won (wone0102@heraldcorp.com)